Banking system remains strong, stable

Banking system remains strong, stable
BSP sees no threat from BF closure
By Michelle Remo
Philippine Daily Inquirer


MANILA, Philippines—The failure of Banco Filipino Mortgage and Savings Bank, which was placed under receivership on Thursday, does not pose any threat to the strong and stable banking system of the country.

This was according to regulators, who said Banco Filipino was an outlier in the industry given that its counterparts have been profitable and able to meet the growing financial services requirements of Filipino depositors and borrowers.

Amando Tetangco Jr., governor of the Bangko Sentral ng Pilipinas (BSP), said Friday that the closure of Banco Filipino was not expected to pose a systemic risk. He expressed optimism that the public would remain confident of the country’s banking sector.

“The overall banking system remains sound and stable. There is no negative impact [of the closure of Banco Filipino] on the banking system,” Tetangco stressed.

Cristina Orbeta, executive vice president of Philippine Deposit Insurance Corp. (PDIC), echoed the statement from the central bank chief by saying that regulators were keen on keeping the “financial sector stability” that the country currently enjoys.

Orbeta said one way to maintain confidence of the public on the banking system was to promptly service deposit insurance claims following bank closures.

In a press conference on Friday, Orbeta assured depositors of Banco Filipino that PDIC would service all valid deposit insurance claims and expedite the process of validation of those claims.

Insured deposits

Preliminary figures showed that there were P9.4 billion worth of insured deposits in Banco Filipino.

“This [amount of insured deposits] is something we can easily pay,” Orbeta said, noting that the deposit insurance fund managed by PDIC stood at P64.6 billion.

The policymaking Monetary Board of the central bank decided to place Banco Filipino under the receivership of PDIC after the thrift bank had been on a bank holiday for three days, failing to service withdrawals by its clients.

The decision also came amid losses of Banco Filipino, which regulators said had been losing an average of P2 billion a year since 2007 and that its liabilities far outweighed its assets.

The BSP said the condition of Banco Filipino was in contrast to that of the overall banking system.

Latest documents from the central bank showed that resources of the Philippine banking system amounted to P6.8 trillion as of the end of October last year, up nearly 9 percent from P6.2 trillion the year before.

The BSP said it expected the country’s overall banking sector to remain strong this year, projecting a further rise in its profits and resources.

Consolidation

But while the overall banking system—whose growth was driven mainly by universal, commercial, and thrift banks—was assessed by regulators to be financially sound and stable, there has been a spate of closures of smaller players, particularly rural banks.

According to PDIC, Banco Filipino has added to the more than 500 banks that were currently under its receivership. Most of these banks are small, rural banks that failed to meet the higher capitalization requirements of regulators.

This backdrop has prompted the BSP and PDIC to push for consolidation in the banking sector, particularly one that involves acquisition by bigger industry players of some undercapitalized rural banks.

The BSP and PDIC are offering incentives to financially strong banks that will acquire rural banks.

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